Allowance for Expected Credit Losses

9 Months Ended

Sep. 30, 2020

Credit Loss [Abstract]

Allowance for expected credit losses

Allowance for Expected Credit Losses

Premiums Receivable

The following table provides a roll forward of the allowance for expected credit losses of the Company’s premium receivables:

	September 30, 2020
	Premium Receivables, Net of Allowance		Allowance for Expected Credit Losses
Three Months Ended
Balance at beginning of period	$	2,203,753	$	36,054
Cumulative effect of accounting change (1)			—
Change for provision of expected credit losses (2)			1,046
Balance at end of period	$	2,225,311	$	37,100
Nine Months Ended
Balance at beginning of period	$	1,778,717	$	21,003
Cumulative effect of accounting change (1)			6,539
Change for provision of expected credit losses (2)			9,558
Balance at end of period	$	2,225,311	$	37,100

(1) Adoption of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326)” See note 1.

(2) Amounts deemed uncollectible are written-off in operating expenses. For the 2020 third quarter and nine months ended September 30, 2020, amounts written off totaled nil and $2.3 million, respectively.

Reinsurance Recoverables

The following table provides a roll forward of the allowance for expected credit losses of the Company’s reinsurance recoverables:

	September 30, 2020
	Reinsurance Recoverables, Net of Allowance		Allowance for Expected Credit Losses
Three Months Ended
Balance at beginning of period	$	4,363,507	$	13,595
Cumulative effect of accounting change (1)			—
Change for provision of expected credit losses			399
Balance at end of period	$	4,621,937	$	13,994
Nine Months Ended
Balance at beginning of period	$	4,346,816	$	1,364
Cumulative effect of accounting change (1)			12,010
Change for provision of expected credit losses			620
Balance at end of period	$	4,621,937	$	13,994

(1) Adoption of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326)” See note 1.

At September 30, 2020 and December 31, 2019, approximately 63.2% and 61.2% of reinsurance recoverables on paid and unpaid losses (not including ceded unearned premiums) of $4.64 billion and $4.35 billion, respectively, were due from carriers which had an A.M. Best rating of “A-” or better while 36.6% and 38.8%, respectively, were from companies not rated. For items not rated, over 90% of such amount was collateralized through reinsurance trusts or letters of credit at September 30, 2020 and December 31, 2019. The largest reinsurance recoverables from any one carrier were approximately 1.8% and 1.7%, of total shareholders’ equity available to Arch at September 30, 2020 and December 31, 2019, respectively.

Contractholder Receivables

The following table provides a roll forward of the allowance for expected credit losses of the Company’s contractholder receivables:

	September 30, 2020
	Contractholder Receivables, Net of Allowance		Allowance for Expected Credit Losses
Three Months Ended
Balance at beginning of period	$	2,179,124	$	6,290
Cumulative effect of accounting change (1)			—
Change for provision of expected credit losses			(389)
Balance at end of period	$	2,185,614	$	5,901
Nine Months Ended
Balance at beginning of period	$	2,119,460	$	—
Cumulative effect of accounting change (1)			6,663
Change for provision of expected credit losses			(762)
Balance at end of period	$	2,185,614	$	5,901

(1) Adoption of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326)” See note 1.